On March 11, 2021, the world’s most expensive NFT sold for $69 million. The winning bid for the digital artwork, “Everyday: The First 5000 Days” by Mike Winkelmann (known as Beeple), broke records as the third-highest price paid for digital artwork in history. It also made headlines as the first time an NFT sold at auction exceeded $1 million.

Elon Musk, Mark Cuban, and Jack Dorsey have all waded into the NFT space. So, what in the world is going on?

Non-fungible tokens — aka NFTs — are nothing more than unique digital identifiers on a blockchain. A blockchain is a distributed ledger that keeps an immutable record of all transactions. An easy way to think of an NFT is like a deed to a house or car; it’s evidence that you own something unique and can prove it if necessary.

You’ve probably heard of NFT on the news. It’s the latest trend in the art world and is quickly starting to make its way into other industries.

But what is NFT? And why are people like Jack Dorsey, Alexis Ohanian, and other celebrities selling their creations as NFTs?

The easiest way to explain it (short for Non-fungible token) is by comparing it to a physical collectible.

What makes this collectible unique? The fact that it’s one of a kind. You can tell its ownership by looking at who holds it, and you can trade or sell it to someone else. A digital collectible works in the same way, but instead of a physical representation, it’s backed by blockchain technology — this is called an NFT.

NFTs allow you to own something digital without worrying about someone copying it or claiming ownership of it. That’s what makes them so valuable and interesting.

Blockchain Music Distribution Platform

In late February 2021, blockchain music distribution platform RouteNote published a report titled “How Blockchain Technology Can Transform the Music Industry.” The report emphasized that blockchain technology could be used to directly connect artists with consumers and allow artists to distribute their content more efficiently.

NFT has become a hot topic in recent times with its growing popularity among the masses. It has been backed by high-profile people such as Mark Cuban, who owns an NBA team, Dallas Mavericks, and Jack Dorsey, the CEO of Twitter. According to Routenote’s report, this would enable artists to receive more revenue for their work, which would positively affect the industry’s overall financial health.

NFTs are different from cryptocurrency because they’re unique every time. Think of them like trading cards: They’re all valuable, but some are more valuable than others, according to their rarity.

Here’s how to get started with NFT:

To start buying and selling NFTs, you’ll need a wallet that supports the technology. Both desktop and mobile wallets are available, but whichever you choose should hold Ethereum. Think of your Ethereum wallet as a bank account for your NFTs. You need an account before you can spend any money — no matter what currency you’re using.

Bidding on NFTs is a little like bidding in an eBay auction. You can place a bid on an item at any time leading up to the end of the auction. The price will rise as bids are placed until the auction ends and the highest bidder wins the item. It helps to understand how much the item is worth before you place a bid, so you don’t overbid or miss anything important about the item when it’s listed for sale.

While the value of cryptocurrencies is based on their limited supply — there are only 21 million bitcoins in existence — the value of NFTs is based on their uniqueness. Sometimes, this uniqueness can be as trivial as the order of random numbers or letters written onto them, and sometimes it can be more complex (for example, a crypto collectible that you can breed with others).

NFTs are usually created using smart contracts on the Ethereum blockchain. This is where you’ll find the most trading activity by far. But they’re not exclusive to Ethereum — they can exist on any blockchain that supports smart contracts. And while they’re generally used for non-fungible assets (hence the “NF” part), they could theoretically also represent fungible assets such as cryptocurrency tokens if you wanted them to.

Non-Fungible Tokens

They’re Fungible — and Non-fungible

Most items are fungible, meaning you can exchange one for another without causing any harm or disruption to its value. A dollar bill is an example of a fungible item. Non-fungible items can’t be exchanged because they’re unique in some way. So, while you can swap a one-dollar bill for another with no loss of value, it’s impossible to swap one house key for another and maintain the same value because they unlock different doors.

Not All NFTs are Created Equal

While they’re minted on the blockchain, some cost far more than others to mint, depending on how much gas — the internal pricing mechanism of the Ethereum network — is needed to make them. NFTs also live on different layers of the blockchain, which means some exist in different places (like decentralized exchanges) than others.

The most popular form of NFT is ERC-721, which is used for high-value collectibles like art or trading cards that have their own names and can’t be replicated.

An NFT Can Still Be Copied

One common misunderstanding is that an NFT cannot be reproduced because it’s linked to a single piece of original artwork. In fact, anyone can copy and paste an original image because it can be converted into bits and bytes on their computer screen — though they would not have ownership rights over the work if they did so.

They’re not Interchangeable

A bitcoin can be used to purchase almost anything, but an NFT cannot. Each is different and unique, making it more valuable than fungible coins like bitcoin. Bitcoin is fungible because one coin is equal to another coin. For example, 1 bitcoin is equal to another 1 bitcoin, and so on.

They Can Cost a Lot of Money

Some have sold for millions of dollars. The most expensive NFT was a piece of digital art called “Everyday: The First 5,000 Days” by artist Mike Winkelmann that sold for $69 million in March 2021 at Christie’s auction house in New York City.

You can earn money with them if you own the right to something others want to buy. You may own an NFT and make money if someone wants your digital artwork or another valuable item you possess and wants to sell through an auction site like Mintable or OpenSea.

Many digital assets — like music files, photos, or tweets — can easily be copied and traded online, but NFTs are one-of-a-kind. When you buy an NFT, you’re essentially buying a certificate of authenticity — proof that you’re the owner of an original piece.

Plenty of skeptics doesn’t see the point in owning “digital art” that isn’t tangible or usable. But supporters say NFTs could help artists prove they own their work and collect royalties when it gets shared and resold online.

Why NFTs are Valuable

This might seem difficult to understand at first glance. After all, most cryptocurrencies are fungible too. One Bitcoin is equivalent to another bitcoin, and so on. So why are these unique digital assets trading for millions of dollars?

Well, for one thing, you can’t just copy them and trade them as if they were the same thing. You can do that with Bitcoin but not with an NFT token because they’re stored on the blockchain, and that makes them immutable – meaning they can’t be changed or altered in any way.

One of the most common questions we get from those who have only heard about NFTs is, “are they real?” While the initial answer may be yes (they are real), there’s more to it than that.

With anything crypto-related, there are bound to be scammers who will try to take advantage of the hype. Recently, a fake Twitter account was created under the handle “@elonmuskNFT” (note the ‘NFT’ part) and began posting tweets that were almost identical to Elon Musk’s real tweets. The scam was quite convincing and had many people falling for it until Twitter took the account down.

NFTs have become a hot topic. The non-fungible token market has grown exponentially in the past 12 months. In one month, there was a transaction volume of $250 million, and it is predicted that by 2025 the NFT market will be worth $500 billion.

Block Chain

NFT Myths Debunked

You need to be a developer to understand how NFTs work

Truth: You don’t. While it helps to understand the basics of how cryptos like Bitcoin and Ethereum work, you can enjoy NFT art whether you have that knowledge or not.

Reading up on the basics of blockchain technology is good for the mind, but you don’t have to be a blockchain engineer to enjoy art in all its forms.

Once I get an NFT, I’ll lose it if I lose my private key

Truth: Not necessarily. If you never share your private key (i.e., you keep it secret) and never give anyone else access to your wallet, then yes, there is a chance it could get lost if you forget what your password is — just like any other digital file.

But if you do give your private key or password to someone else for safekeeping, then that person can access your wallet and help you recover those files in case you ever forget them.

Fungibility is the quality of interchangeable things. A $20 bill, for example, is fungible because any given $20 bill can be exchanged for any other $20 bill. That’s not true of an NFT — it represents something unique.

To make this more concrete, let’s look at the most famous example of an NFT:

CryptoKitties. This was a blockchain-based game where players could buy and sell virtual cats with different attributes and names. One might have a particular name and be very rare (and therefore expensive), while another might have a different name and be common (and therefore cheap). Neither cat could be exchanged for the other, even if they had identical qualities.

NFTs can only be art

NFTs can take on literally any form of digital property. While most of the hype around NFTs has been around art, it could easily be applied to anything you want to own.

NFTs are eco-unfriendly

NFTs are often criticized for their high energy consumption and carbon footprint, which is true if they are being minted on Ethereum.

However, this doesn’t mean that NFTs cannot be sustainable. Many other blockchains are working towards being more sustainable, and there are projects like Mintbase that allow you to generate NFTs on the Bitcoin blockchain. Bitcoin has historically been seen as more sustainable than Ethereum due to its Proof of Work (PoW) consensus model.

Moreover, the creators of each NFT usually have the option to choose which blockchain they wish to use, so it’s up to them which one they want to use based on certain factors such as sustainability.

A digital NFT can be copied at any time

It’s true that creating a digital copy of an NFT is a trivial task. Anybody with access to the code can do it. However, this does not make the original any less valuable than it was before. While the value of an NFT is directly tied to its scarcity, so is the value of a baseball card or a gold coin. Owning a digital item doesn’t necessarily mean anyone can make more copies of it.

The only thing that makes an NFT valuable is the art itself

While artwork plays a huge role in determining how much an NFT is worth, other factors also come into play.

For instance, some artists have managed to sell their creations for hundreds of thousands of dollars because they’ve built up a loyal following over the years. They’ve also become prominent members of online communities and are known for their contributions to the industry. This means that their reputation plays a huge part in determining how successful they are on crypto marketplaces — and how much they earn from selling their work.

NFTs can’t be used for anything

Fact: NFTs can have all kinds of uses.

They can be used to sell virtual lands and digital art or offer access to exclusive content. They can even be used as tickets, with the authenticity and ownership recorded on the blockchain.

Anyone can make an NFT

Fact: Anyone can indeed create an NFT, but that doesn’t mean every NFT will gain traction and value.

NFTs will be more valuable when they’re created by artists who are already well-known or respected within their niche. That’s why it’s not uncommon to see new NFTs released by popular musicians or other celebrities. There’s also more interest in the works of artists who have a history of producing great art. This is why artists like Beeple have sold their NFTs for record amounts (Beeple sold an NFT for $69 million).

NFT is the future of gaming

The truth is, we don’t know if NFTs are the future of gaming or not. What we do know is that they’re a fascinating new form of digital entertainment and one that will appeal to those who like nostalgia and enjoy physical collectibles. They’re also worth keeping an eye on for anyone interested in the next generation of digital collectibles. After all, if NFTs do turn out to be something greater, you’ll want to be sure that you can tell your grandchildren about being there first.

I can’t tell you if NFT will be the future of games because I don’t know. But I could very well be. I just can’t say with any amount of certainty how it will play out. But I think that the “experts” and influencers would do well to tone it down a notch—there’s plenty of room on the hype train for me, too; I don’t need to push people out of the way to get on board.

With the aforementioned information in mind, I truly believe that NFC-based items will be a fixture in our lives in the very near future. We know that our families are really looking forward to upgrading their cell phones, their payment systems, and indeed all of their day-to-day activities as we begin using NFC-based items with all of the conveniences they can provide. When you think about the benefits, the other shortcomings and complications are quickly outweighed by all of the advantages. Together, we can begin to move into an amazing future full of NFC-based products!